Making the Most of Your Small Business's Employee Health Insurance Offerings

Offering good health insurance benefits can play a big part in attracting quality people to your company and in retaining them on your employee payroll. In addition, workers can be more productive when they’re healthy and free of worry about how they would pay for medical care if they or a family member were to fall ill.

But providing good health coverage for employees – or any coverage at all – is a challenge for small businesses. Because small firms don’t get the same price breaks that larger companies do, small businesses pay about 18 percent more per worker than large businesses do for similar health insurance policies, according to the Commonwealth Fund, an advocacy group for health care reform.

That differential in health insurance premiums for small businesses comes on top of dramatic year-over-year increases in health insurance costs for U.S. businesses as a whole. According to the Kaiser Family Foundation, the cost of employer-sponsored health insurance increased 9 percent for family coverage and 8 percent for single coverage in 2011. That rate of increase far outpaced the nation’s overall rate of inflation last year (about 3 percent), continuing a pattern that has persisted for more than a decade and that will continue into 2012.

How to handle these staggering cost increases?

First, it’s important to educate your workforce about the true cost of health insurance today. If you need to ask employees to begin contributing more toward their health insurance premiums, it cannot hurt to make sure that they understand the bigger picture.

Employees may think the payroll deduction that they see taken out of each paycheck for health insurance premiums is a large one, without having any idea just how much larger the employer contribution is. It’s not unusual for employers to pick up 80 percent of the tab for employee health insurance.

However, you might want to rethink a planned increase in employee premiums in light of a survey sponsored by eHealthInsurance. The survey showed that employees actually tend to prefer having benefits scaled back rather than paying more to keep them the same. Some companies opt first for dropping dental and vision insurance, but every company’s workforce has different needs.

If decisions must be made about changes to health coverage, give employees the opportunity to communicate their health insurance needs and preferences. It’s important to respect privacy and preserve confidentiality, so individual employees cannot be questioned about their past or current health status. But an anonymous poll or questionnaire can be circulated asking employees which types of benefits are most important to them. Your decisions can be guided by the results of such an employee poll.

Don’t forget that under the Affordable Care Act, a tax credit is available until 2014 for any small business with 25 or fewer employees whose average annual wage or salary is less than $50,000. Your small business could qualify for a credit of up to 35 percent of the premiums its pays for employee health insurance.

Whatever compensation package you offer your employees, Padgett Payroll Services can help you by providing accurate and timely small business payroll processing. Call the payroll specialists at Padgett Payroll Services today at (706) 548-1040 to learn much more about how your business can benefit from outsourcing payroll to us.

Do you have the support you need to manage your small business bookkeeping? Contact us to schedule an appointment to speak with a local small business advisor.